Enovix Corporation (NASDAQ:ENVX) Q3 2025 Earnings Call Transcript

Enovix Corporation (NASDAQ:ENVX) Q3 2025 Earnings Call Transcript November 6, 2025

Operator: Thank you for standing by, and welcome to Enovix Corporation Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today’s program will be recorded. And now I’d like to introduce your host for today’s program, Robert Leahy, Head of Investor Relations. Please go ahead, sir.

Robert Lahey: Thank you. Hello, everyone, and welcome to Enovix Corporation’s Third Quarter 2025 Financial Results Conference Call. With me today are President and Chief Executive Officer, Dr. Raj Talluri; and Chief Financial Officer, Ryan Benton. Raj and Ryan will provide remarks followed by Q&A. Before we begin, please take note that today’s call contains forward-looking statements that are subject to risks and uncertainties. These statements are based on current expectations and may differ materially from actual future results due to various factors. For a discussion of these risks, please refer to the disclosures in today’s press release and our filings with the Securities and Exchange Commission. You can also find these materials on our website at ir.enovix.com.

All statements made on this call are as of today, November 5, 2025, and we undertake no obligation to update them, except as required by law. Additionally, during the call, we may reference non-GAAP financial measures. You can find a reconciliation to the most directly comparable GAAP measures in the materials posted on our Investor Relations site. With that, I’ll turn the call over to Raj.

Raj Talluri: Good afternoon, everyone, and thank you for joining us. Enovix is expanding the limits of battery capabilities and transforming how the battery industry will evolve over the coming years with a silicon battery. During this quarter, our team made significant advancements in developing a silicon battery while strengthening our key partnership alliances. Today, I’ll highlight our progress in Q3 and then provide updates on our initiatives in smartphones, smart eyewear, defense and strategic initiatives before turning it over to Ryan for a financial update. We delivered strong execution and financial progress in Q3. Revenue grew 85% year-over-year to $8 million. We achieved a non-GAAP gross profit of $1.7 million or 21% margin compared to a loss in the prior year.

We also secured long-term funding, which is expected to finance Fab2 and enable our path to positive cash flow. Completing a shareholder-friendly warrant dividend and issuing a new convertible notes due in 2030 brings total cash and marketable securities to $648 million at the end of the quarter and allows us to execute from a position of strength. Our AI-1 smartphone battery was validated by an independent testing firm, Polaris Labs, as the highest energy density battery reported for a smartphone battery in the industry and in addition, having leading fast charge capabilities. Our lead smartphone program with Honor, a top 8 mobile OEM has entered the final validation phase ahead of planned 2026 smartphone launch. Honor has been an outstanding partner, and we appreciate their cooperation as we work tirelessly to bring this breakthrough technology to the mobile phone industry.

Honor’s feedback on our product development and inputs into mobile battery needs has been instrumental in the execution of our road map as we advance towards commercialization. Besides Honor, our second smartphone OEM development program is also accelerating with this additional customer also now in qualification. And we are continuing to sample to other top mobile OEMs. Our mobile partnerships offer us key market insights and reflect the strong commercial relationships we have today in this market. In smart eyewear, we delivered over 1,000 battery packs to our lead customer under our supply agreement. These packs are now undergoing customer qualification. Furthermore, we have delivered samples to 9 other unique OEMs and ODMs, and we expect to have some of them launch products using our batteries in 2026.

On the manufacturing front, we made significant progress in yield, throughput and cost optimization. We achieved yield improvements in Fab2 in Malaysia across all production zones, notably in Zone 1 laser dicing. We optimized our battery formation process in Zone 4 to increase the throughput materially. We believe Zone 4 capability now exceeds the volume requirements for the second and potentially the third high-volume lines, significantly reducing future CapEx requirements. Shipments from our Korean factory accounted for the majority of our year-to-date revenue, with the largest contributions coming from defense and industrial customers, where we continue to benefit from strong demand. We completed the integration of our Q2 acquisition of SolarEdge assets, adding cell capacity, incremental coating equipment and room for future expansion.

Additionally, leveraging the capabilities of this team, we began building our first cell manufacturing capability for our 100% active silicon anode technology in Korea also. This will serve as a new product introduction line, our NPI line. Finally, I want to welcome Dan McCranie to our Board of Directors and Srikanth Kethu as Head of Enovix India, expanding our leadership team as we scale globally. Dan is a high-impact operator, sales executive and a broad leader with deep experience scaling complex technology businesses. His track record at onsemi and other global semiconductor companies adds immediate strength to our Board as we expand commercialization and manufacturing in 2026 and beyond. Our new Head of India, Srikanth, will strengthen our world-class R&D center in Hyderabad, which accelerates our R&D efforts and help ensure the success of scaling our Malaysia facility.

Now let’s talk about smartphones. Since I started in 2023, I focused the company on smartphones as the most financially attractive market to our batteries. After visiting key OEMs in April 2023 and getting an understanding of the key product requirements from them, we started developing our smartphone batteries to meet these stringent performance targets. As we developed our technology to meet these requirements, we entered into a development agreement with Honor as a lead customer in September 2024. Over the last year, we made significant progress both in our product development and meeting their product qualification milestones. We passed the vast majority of Honor’s qualification requirements and in several cases, exceeded them. In order to consistently achieve 1,000 charge discharge cycle with their components, we have agreed to a design iteration, which is already underway.

We’re on track to ship these samples in Q4, enabling Honor to complete full life cycle testing. This additional cycle is part of a thoughtful, collaborative qualification process that’s typical when introducing breakthrough battery technology into flagship smartphones. This rigorous collaborative process of building a leading-edge smartphone battery with Honor, we believe, enables us to launch products with the rest of the smartphone industry in a relatively seamless fashion. Our second smartphone customer is now validating the AI-1 performance. The next milestone for this customer will be to provide us with the precise mechanical dimensions of battery we need to supply and move to a qualification and an expected commercial launch in 2026. Additional smartphone customers have similar requirements to our lead customer, and we expect their qualification process to go much faster.

What’s exciting about AI-1 is that it’s not just a smartphone battery. It’s a platform. Providing this level of performance can open the doors to a much wider set of markets. We started in smartphones, a $12 billion opportunity where our 900 watt hour per liter performance gives us a clear edge for on-device AI. From there, the same technology moves naturally into smart eyewear, AR/VR and IoT, about an $8 billion market today, where success depends on getting high energy into the smallest possible space. In defense, roughly a $3 billion market opportunity, customers are choosing Enovix for a rugged, safe, mission-ready designs and diversified supply chain with manufacturing in Korea and Malaysia. And longer term, our silicon anode architecture scales across EVs and computing markets that should exceed $500 billion by 2040.

Now let’s turn to smart eyewear specifically, which is proving to be a faster-moving adjacent market than we previously expected. We currently have 2 cell designs for this market as we see 2 distinct product classes emerging, displayless smart eyewear designed for lightweight, voice-driven experiences and display-enabled AR eyewear, which carries much higher compute and battery demands. We expect this to be a broad market with many different consumer electronics and fashion brands launching products in 2026. The AI-1 platform enables significantly longer run time in this space-constrained application. We now have sampled the AI-1 platform to 10 unique smartware OEMs and ODMs, and we expect to showcase the first end product with an OEM publicly in CES 2026 in January.

Turning to defense. Momentum continues to build this quarter across multiple geographies. In Korea, we combined seasoned manufacturing capabilities for conventional lithium-ion batteries with our expertise in silicon anodes. Our leading products now include silicon doped anodes and the customer response has been encouraging. Year-to-date, our Korea facility has shipped roughly $20 million of products, the majority of which went to domestic defense and industrial customers, including two of the major three contractors in the Korean military. With customers outside Korea, we are seeing strong progress in both aerial and subsea drone markets. These customers are increasingly diversifying their supply chains and our manufacturing footprint has opened doors with them.

Based on customer feedback, our products are meeting the demanding requirements of this segment, including high pressure tolerance, long cycle life, large capacity formats of up to 60 amp hours that operate reliably in low temperature environments. We have a robust pipeline of opportunities in this segment growing to over $80 million globally. Before I turn it over to Ryan for the financials, I want to provide an update on the M&A front. Our mission remains unchanged, commercializing our 100% active silicon anode architecture for space-constrained high-volume devices. Our conviction drove us to strengthen our balance sheet, giving us optionality to accelerate growth organically and inorganically through strategic M&A. This quarter, we began evaluating several opportunities that could advance commercialization through vertical integration and accelerating entry into complementary markets.

A select few that meet our strategic financial criteria are under consideration, and our funnel of opportunities continues to grow. While we continue to evaluate opportunities that fit our strategy and financial filters, we have not entered into any agreements at this time, and there is no certainty that any such opportunities will result in completed transactions. Now I’ll turn it over to Ryan to give a financial update.

Ryan Benton: Thanks, Raj, and good afternoon, everyone. Before I get into the financial results, I want to highlight the capital markets activity we executed during the third quarter. On the left side of the slide, you can see the summary of our warrant dividend program. We completed the program at the end of August with all warrants either exercised or expired. Roughly 26.5 million warrants were exercised, generating about $224 million in proceeds, net of fees and expenses. During the third quarter, we repurchased approximately $58 million of common stock. The net of these 2 programs resulted in $166 million in net liquidity, strengthening our cash position, enabling the funding of our Fab2 build-out and other strategic initiatives.

On the right side, we show the convertible notes offering completed in September. We issued $360 million of 4.75% notes due in 2030, which after purchase discounts and capped call costs added about $303 million in net liquidity. The notes convert at $11.21 per share with a redemption trigger at approximately $14.57 per share. The capped call overlay has the ability to substantially offset potential dilution. As shown on the slide, we structured the cap call using multiple tranches, which provides several interim payoff opportunities during the term rather than the typical all or nothing settlement at maturity. If Enovix’s stock price meets or exceeds one of these price thresholds, there is a substantial payout. If we meet all of the targets specified, the company could receive cash proceeds of over $200 million.

We believe that this structure lets us capture value as we execute while managing dilution responsibly over time. The net result of all this is that we closed the quarter with $648 million in cash, cash equivalents and marketable securities. The goal wasn’t just to raise capital. It was to remove what we perceived as a financing overhang to give Raj and the team the confidence to execute upon our strategy without distraction and to give our customers comfort in our financial strength. I believe to a large extent, we have achieved these goals, and it’s been impactful. We now have the resources we expect will allow us to fund Fab2 to pursue select strategic opportunities and to operate with confidence. It’s exactly where a company at our stage should be.

Now turning to the Q3 results. This was another strong quarter of execution for Enovix. Revenue came in at $8 million, up 85% year-over-year as we continue to deliver solid growth across defense and IoT programs while simultaneously advancing sampling activities with our lead smartphone and smart eyewear customers. Non-GAAP gross profit was $1.7 million, representing a 21% gross margin compared to a loss in the same period last year. The improvements reflect higher sales, favorable product mix and continued cost discipline. Non-GAAP operating expenses were $31.5 million, up year-on-year. The majority of the increase was driven by higher depreciation and amortization with modest increases in R&D and manufacturing readiness investments. As a result, non-GAAP loss from operations came in at $29.8 million versus $26.9 million in the same period last year.

Adjusted EBITDA, however, which excludes depreciation and amortization, improved by $2.3 million, a 10% improvement year-over-year. Non-GAAP net loss per share attributable to Enovix was $0.14, an improvement of $0.02 from Q3 2024. Overall, we delivered against our plan and continued building the foundation for scale and profitable growth. You just saw the detailed walk-through of our Q3 results, so I’ll focus here on guidance for Q4 and some context. For the fourth quarter, we expect revenue between $9.5 million and $10.5 million, up 25% sequentially at the midpoint. We expect non-GAAP loss from operations between $30 million and $33 million, reflecting continued investment in manufacturing readiness and product launch preparation as we scale towards volume production.

For non-GAAP net loss per share attributable to Enovix, which includes the impact of interest expense on the new convertible notes, we expect between $0.16 and $0.20. And finally, we’ve added a new metric for guidance. We are forecasting capital expenditures, which for the fourth quarter, we expect to be between $9 million and $12 million, primarily tied to Fab2 equipment as well as the build-out of the NPI production line in South Korea. Note, our guidance does not include mass production for any commercial smartphone shipments to Honor in Q4 2025. Importantly, however, we believe that the customer commitment and launch plans remain firmly intact. Our second smartphone OEM program is also progressing well in parallel. While we’re not giving 2026 guidance today, investors should expect a more back-weighted revenue profile next year following end customer qualification and product launches.

With $648 million in cash, we believe we are well positioned to continue executing on our plan, and we remain prepared to pursue strategic opportunities where they meet both our strategic and financial criteria. And with that, operator, we’re ready for questions.

Q&A Session

Operator: We will now begin the Q&A session. Please note that this call is being recorded. Before we go to the live questions, we’re going to read two of the most highly voted questions submitted by shareholders ahead of this call during the call registration. The first question is, do you have just 1 or 2 smartphone battery customers at this point? And do you have enough capacity to satisfy their needs?

Raj Talluri: Thank you for the question, and thank you all for listening. We have agreements with 2 smartphone OEMs, and both are in different stages of qualification. And of course, we’ve also sampled 7 of the 8 top smartphone OEMs over the past period from — with our batteries. And we — and we are getting positive feedback from all of them on how they feel about the batteries, different safety tests they’re performing. On the capacity front, we — as I mentioned, we have a line that when fully facilitized, can produce up to 9 million batteries a year next year. And we also started making some — last call, I mentioned that we started making some initial payments towards augmenting the Line 2 and so on. So we absolutely do have the capacity to support both the customers as they ramp. And 2026 will be a breakout year, and we’ll continue to add capacity to support all our customer demand in ’27 and so on.

Operator: Thank you. And the second question is, will Enovix pursue rapidly evolving drone manufacturers requiring improved batteries?

Raj Talluri: Yes. Thank you for that question. So this is a market that, as you mentioned, is rapidly evolving. We are getting a lot of interest from many drone OEMs, both in aerial and subsea, like 2 class of drones that we are finding. And we have been shipping batteries, high-performance, high rate batteries from our Korea facility to many defense customers in South Korea. We are now able to satisfy and sample those to other drone manufacturers that are asking us for those batteries now. And in fact, we just got another purchase order today from a high-tech defense manufacturer here in the U.S. to provide more samples for evaluation of their programs. So yes, this is a fast-moving market, and we’re getting a lot of interest for our already existing commercial batteries that we’re making in Korea.

Operator: Okay. And we will now go to the queue. [Operator Instructions] Our first question comes from Mark Shooter from William Blair.

Mark Shooter: Congrats on naming Honor as your lead smartphone customer. This is a big name in China. Unfortunately, though, it looks like they want 1,000 cycles now. Is this correct? And how much of this was a surprise to the team? And what’s required in the design front to achieve that?

Raj Talluri: Yes, the requirement has always been 1,000 cycles. As I mentioned in the last earnings call, we have — it’s a development program that we’re working together with them, and we gave them samples in July, and we were doing cycle life testing while they were doing cycle life testing on the same batteries we provided. And as we went along in this testing process, we realized that we need to make one more small design change to get to the full performance that they want. And we validated that change now internally, and we have confidence that, that change we made will actually go to the 1,000 cycles requirement. We’re now making batteries to that specification, and we expect to get those batteries and send them out to Honor this quarter, and they will start the testing again.

And as you know, batteries are one of those things where when you give a new design iteration, we got to start the cycle life testing again, and it takes 3 to 4 months to do it because of just the nature of the process. We expect that to get done in 1Q next year, and then we expect to get the commercialization after that. But we’re very happy with the progress we’ve made. It’s been very collaborative, and they have allowed us to mention their name, giving us — with all the progress they have seen and what we have made and how good the batteries are. So I’m very, very confident with what the team has done, and it’s going well, and we expect the batteries — and I’m confident the batteries we shipped in 4Q will meet all the requirements.

Mark Shooter: That’s great. I appreciate that. You touched on that time line. I’m wondering if you could add any more color there? Should — you mentioned 3 to 4 months. Should we be expecting that first regional testing PO to happen in Q1 with a follow-up maybe in Q2? I mean how are you guys looking at this now?

Raj Talluri: Yes. I mean, look, we don’t want to launch anything — they don’t want to launch anything together. We want to launch a battery that’s fully tested, solid, safe, meets all the requirements because the first battery to production, and we want to make sure we do everything right. So as I mentioned, it takes 3 to 4 months to validate it after we shipped it. And then they’ll need to put it in their phone and then the next model will intersect. So we should expect something in the first half of next year if everything goes well.

Operator: And our next question will come from George Gianarikas from Canaccord.

George Gianarikas: I’d like to just continue on the path of the questions around Honor. Again, congratulations. And just trying to understand the cadence of production and orders that we should be expecting. You mentioned the first quarter, we should get more detail around an order and then maybe ramping production in the second. Just your level of confidence that this is sort of the last design change before achieving order status and then production.

Raj Talluri: Yes. Look, I’m very confident. My team is very good. They’ve done tremendous work, and this has been a close cooperation with the customer. So we are seeing everything and they’re seeing everything. They are giving us solid feedback. Again, we are trying to launch everyone should understand 100% active silicon anode battery into a smartphone, which has never been done before with a brand-new factory. So we made tremendous progress. That’s why I put the time line out there. So for all the — all our investors and for you guys to get a feel for what — how complex this is and how much progress we have made. I’m very confident. But as I always mentioned, we don’t want to launch anything that’s not 100% solid, and we work closely with our customers.

And if all the testing goes well, I think it will be fantastic to launch next year. And again, there’s another customer right behind that’s also testing it, the same design iterations that we’re making. That customer is also getting it. We got feedback from them that this is really benchmark in energy density that they’re seeing. So there’s a lot of interest, but we want to make sure it’s solid when it goes to production. And as Ryan mentioned, we have a strong balance sheet, and we are well capitalized. So we have what — we have the resources we need. We have a factory that’s running well to get it to full production at the right time next year.

George Gianarikas: And maybe as a follow-up to switch gears regarding an acquisition. Obviously, you’ve built up an incredibly strong balance sheet. I’m curious as to where you’re looking? In other words, what opportunity set are you looking to explore from an M&A perspective just because you have this enormous opportunity in front of you just with the cells that you plan to manufacture soon. What could you add to the tool set that will make that addressable market even bigger?

Raj Talluri: Yes. Well, first thing I want to say is I want to be — everyone to be clear, our mission is to make this great technology we have of 100% active silicon anode batteries into smartphones, AR/VR, IoT, compute and in some aspects into some EVs. That’s our #1 goal, and we are squarely focused on that. But we do find as we go into that, that there are other aspects we could add to accelerate that growth in terms of channel, in terms of time to market, in terms of other components that help get that penetration of this great technology into market faster. But again, we will do it very thoughtfully. We’re not — we’re going to do it in a way that is financially makes sense and also does not distract us from our main goal. So that is probably all I can say at this point. And we are getting quite a bit of inbound interest, as you mentioned, because we have a very strong balance sheet, but we’re going to be very thoughtful about how we use it. Ryan can comment.

Ryan Benton: I mean I can’t say it better. I mean, I think we’ll pride ourselves on being good stewards of capital. It will have to make sense from a strategic standpoint, from a technology standpoint in order to further the core mission, and then we’ll apply discipline, financial and diligence filters to it.

Operator: Our next question comes from Jeff Osborne from TD Cowen.

Jeffrey Osborne: Just two on my side. You mentioned, Raj, the yield improvements in Malaysia. I was wondering if you could just level set us where were things, where are things? Where do you need to be? I think TJ touched on sort of a risk ramping up aggressively next year to meet the customer demand. So relative to maybe where his expectations and yours are, what’s left to do? And what have you achieved so far?

Raj Talluri: Yes. Great question, Jeff. Look, this year, what has happened is we’ve had so much inbound interest on various markets. As I mentioned, 2 cell phone OEMs that we have development agreements that we had to make the batteries and these are actually the batteries that you see here that have been sampling to the customers. And then we had 2 different smart eyewear customers, and this is actually the batteries that we ship from our factory that go right into the leg here, 2 different sizes of that. Then we had another IoT customer, which is potentially very high volume. That’s a slightly different size. We had to make that one. Then we were making the battery for the defense contract that we had. So a lot of like 5, 6 different cells that we’re making.

And the reason I tell you that is when you’re making so many different sized cells, you have to constantly adjust the lasers, adjust our stackers to — and the tooling to make each of those. So we — and these are just samples, right? We’re talking hundreds and thousands of units. So we did not really spend that much effort and energy on optimizing for yields because by the time we got one done, you’re just retooling it for the next one. Now we’ve given all the samples to the customers. We are focused on 2 markets, 2 products, which are shorter term for production like in ’26, which is a bigger smartphone cell, this one and the smaller AR/VR cell. So these 2 cells is what we are focused on now. We have an Agility line, we have an HVM line. And since the last couple of months, the yields are coming up very nicely.

And I review this every week. Actually, every week, I have a meeting on execution and very pleased with the progress, particularly on the laser side and on the stacking side, they are where we expect it to be. And again, like I said, the high-volume production now is mid- to late next year. So we will be ready for benchmark yields by that time. So I feel pretty good that it’s headed in the right direction, and we are focused on it now.

Jeffrey Osborne: Great to hear. Maybe just as my second question, to follow up on Mark’s prior question. Can you just be more specific as it relates to was there a scope change with Honor as it relates to their expectations? Or was there a form factor change or chemistry change? I’m just trying to understand better the tweak that you made that then now has to go through this new validation testing cycle. I get that there was a change, but what was it driven by? And what was the nature of the change?

Raj Talluri: So when we send the samples to them, I think I mentioned last time, we were doing cycle life testing while they were doing cycle life testing, which means you charge your battery, discharge your battery, charge your battery, discharge the battery. You want to do it 1,000 times. Now we weren’t — we hadn’t completed the cycle life testing before we shipped the battery. We had done some amount of cycle life. We sent it to them. They started doing it. Along the way, we noticed that the trend line is now such that to get past 1,000 cycles, we have to make a chemistry change, not a form factor change, not a scope change. So — and we started validating that chemistry change, and we now have samples internally that we believe now will go all 1,000 cycles.

And we are making batteries with that new chemistry now, and those should come out in Q4. And this is a normal process in building a battery for the first time. Things take a little bit longer initially than we expect. But once you get the first one done, it’s a whole lot easier because all the other smartphone customers have very similar requirements.

Operator: Our next question will come from Colin Rusch from Oppenheim.

Colin Rusch: Could you talk a little bit about the supply chain and preparedness? Certainly, there’s been a lot of innovation around some of the anode materials that you guys could potentially use. And can you talk a little bit about what that opportunity set looks like as you work to advance some of the advanced applications that you’re talking about here, both in the phone and the military markets?

Raj Talluri: Yes, absolutely. So what we are finding now is, I think maybe just for the broader audience, we are an architecture first battery manufacturer in the sense that we can take advantage of higher capacity or higher voltage cathodes. We can take advantage of different kinds of silicon anodes. We can take advantage of the latest advances in electrolytes to build a great battery because the better the materials get, the better our battery and our energy density we provide gets because we control the swelling and we have intellectual property and how to mix these different materials. So to your point, what we are finding, Colin, is that there are quite a few now of silicon anode suppliers. We were using before a silicon anode called SiOx, which is some kind of oxide — silicon oxide.

Now we’re using SiC, which is silicon carbon. But there’s different variations of silicon carbon. For example, the size of the particle of the carbon or the shape of the particle is a little bit different. The way they’re manufactured is different. So we are testing quite a few of them. We are sampling with one, but we have second source and third source on various one of these things. So it’s an exciting time to be a battery manufacturer because we can take advantage of all these tremendous material innovations and provide better and better batteries.

Colin Rusch: And can you talk a little bit about the laptop opportunity? You’ve heard a lot about the phones and eyewear. But certainly, you guys have a fairly sizable opportunity in laptops as well. And as you get through some of the validation on the phones, how quickly could you transition into some of these other opportunities given that it seems like once you get the first one done and dusted, a lot of folks are going to line up real quick for incremental demand?

Raj Talluri: Yes. I mean it’s a very good question. I mean I think you see now what AI is doing to all the edge markets, right? I mean you can see now all the AI PCs that are coming out. We talked about AI applications and smartphones. AR market is just happening because of generative AI because you’re able to now talk to these things. So almost all these end markets which use batteries at the edge, the demand is increasing and the performance requirements and the battery requirements are increasing. So laptops is a very exciting market. But again, for a small company like ours in early stage, we need focus. And I have been very focused on going after smartphones because I always believe that is the toughest battery to make, and we have a very good relationship with customers who are giving us requirements that we need to meet.

From then — from there, once we make that battery, we will be able to very quickly address other markets. Similarly, you can — you are seeing now how quickly we were able to address the smart glasses market because we have the smartphone technology. And I see the computers coming similarly. Once we get our smartphone battery ready and in production, we should be able to quickly go into the compute market. Because in that market, basically, what it is, is it’s a bunch of smartphone batteries put together. That’s one way you can think about it. It’s not like one giant battery. It’s a bunch of 5 batteries packed together. So packaging, battery management systems, those are the kind of things that we partner to get our battery technology into those markets.

So we are talking to some of those customers. But if anything, I’m holding back the team from getting too many samples out there because we don’t have the scale to support all of them at once. I’d like to do 1 or 2 really well and then expand.

Operator: Our next question comes from Ananda Baruah from Loop Capital.

Ananda Baruah: Yes, I guess a couple of clarification for me. Raj, was it that you said first half 2026, expect initial production volumes with Honor?

Raj Talluri: Yes. Again, it depends on how well the testing goes with them. I’m confident that what we’re gaming this time will be really good in the sense of meeting the 1,000 cycle requirement. And if that goes really well, we’ll find the right phone intersect for first half.

Ananda Baruah: Got it. Awesome. And then the second smartphone customer, was it production in 2026 is the goal? And then part B of that question is, you had mentioned that you’re able to sort of go through the process more quickly with the second smartphone customer. Can you just give some context around that? How much more quickly, what parts of the process like that? And I got a quick follow-up.

Raj Talluri: Yes, sure. Yes, it’s also targeted for second — for next year’s production, but probably the later half of next year because given where we are starting — because what we need to get from them, we’ve given them some cells, they’re not testing. And next step from them is to get the exact dimensions of the cell that will launch into production next year, towards later part of next year, fall is when typically they launch. And we’ll have some time to make the battery to the exact dimensions in the first half, give it to them and they’ll put it through their phone and qualify it. Like, for example, as I mentioned, this 1,000 cycles testing, right? We’ve now figured out what it takes to get to 1,000 cycles, and we have that chemistry now that we’ll be sampling end of this quarter — in fourth quarter of this year.

You can see now that the next customer will actually get samples that we would have validated for 1,000 cycles. So you can see this problem that we are now addressing would have been solved, right, because we got ahead of that. And there’s a lot of things we learned with our collaboration with Honor, how they do with the drop test, how they do cycle life test, how they do fast charge test, how the battery management system is controlled by them, what temperatures they store the batteries, how much swelling is allowed at various temperatures. So there’s a tremendous amount of know-how in how batteries are tested to get into smartphones, which we now have, thanks to our first customer. And that’s helping us with the second one because the second one also gave us the requirements and we looked at it, we’re like, wow, these look very similar to the ones we got for the first one.

So we’re now able to meet them much faster. And my expectation is that the rest of the market will have very similar requirements because they’re all phones going into similar markets. So that’s why my comment on the first one is the hardest for the ones after that will be a whole lot simpler.

Operator: [Operator Instructions] Our next question will be from Derek Soderberg from Cantor Fitzgerald.

Derek Soderberg: So Raj, on the chemistry change, my understanding is the chemistry reformulation can take maybe multiple months, depending on how big of a change it is, I guess. Can you share like the time line from when you notice the issue to actually solving and integrating the new chemistry? And I guess what’s maybe the risk that the new chemistry doesn’t quite interact with the rest of the battery and you might need to reformulate it again?

Raj Talluri: Yes. I mean, look, the way we operate is we have a bunch of different chemistries that we are constantly have as backups. If this one doesn’t work, what do we do next? What do we do next, what is next? My engineering team has been studying these, again, for the last whole the last year. We picked one that we felt was — had the best chance, but we had backups running at the same time to see what it would be if that one had some challenges. And now the backup, we’ve tweaked it and the results so far look very good. So I’m confident that the batteries we shipped this quarter will meet. But we have other backups running to them if those need another tweak. I don’t believe we’ll need one more, but we’re always good to be prepared with multiple chances, right?

The unfortunate thing about this, Derek, these are not like chips where we can do simulation and figure out what will happen, what will not. Like, for example, when I used to build processors, we’d have a simulation model. We would do analysis. We’d know what to do and then tools will help you do it. And when you tape out, you’re pretty much guaranteed to get it. Unfortunately, in batteries, you just have to run for 1,000 cycles before you — before you know if you got it. That’s just the nature of it. But the good news is once you get it, you have it. So the first one is hard, but I feel pretty confident, but let’s see how it goes.

Derek Soderberg: Got it. No, I appreciate that. And then as my follow-up, Ryan, as you’re looking into some of these potential agreements, I think ASPs have maybe changed since you guys have kind of last spoken about maybe a revenue breakeven point for the company. So as you guys sort of start to ramp to multiple customers, can you maybe share maybe what that revenue breakeven point is for you guys or anything else maybe on the near-term profitability model, if you update — if you need to update margins or anything like that, can you share any of that detail now that you guys are sort of moving towards commercialization here next year?

Ryan Benton: Yes. No, I think, look, fundamentally, I think we like where the market is going in terms of valuing our technology in our product. I’ll stay consistent with what we’ve said in the past that an important milestone for us is to get multiple HVM lines in place build out in Fab2, and that’s why we’ve started that process. In addition to getting lots of operational benefits of being able to switch over lines and run multiple products, it helps get to a certain level of scale. And it’s really beyond that point. So Line 2, Line 3 that we think gets us to where we’re gross margin positive and able to absorb the overhead. This is on a non-GAAP basis. And then really, it’s as we march towards filling Fab2 with equipment and getting full utilization there that we see as being adjusted EBITDA positive or a proxy for cash flow positive.

Operator: There are no further questions at this time. With that, I’d like to turn the call over to Dr. Raj Talluri for closing remarks.

Raj Talluri: Yes. Thanks, everyone, for the thoughtful questions and joining us today. To close, I want to bring it back to the big picture. Enovix is entering one of the most important phases in our company’s history, which is taking our breakthrough technology and scaling it to commercial production. We have a clear line of sight to that goal. Our AI-1 platform has been validated by third-party Polaris Labs as the highest energy density battery ever reported in a smartphone. Our lead smartphone and smart eyewear programs are progressing towards launch. Our manufacturing capabilities at Fab2 are ramping steadily. And we’ve delivered — we have strengthened the balance sheet, and we secured the capital we need to execute. And we built a team that knows how to deliver.

While qualifications and ramp cycles take time, what matters most that we are on the right path, with the right partners, with the right technology and with the resources to see through. I am incredibly proud of what the team around the world has accomplished, and I’m confident in the road ahead. Thank you once again for your continued support and for your interest in Enovix. We look forward to updating you on our progress next quarter. Thank you.